[Click eStock] "LG Electronics, Earnings Outperform COVID Impact... 1Q Operating Profit Expected to Exceed Market Expectations"

[Asia Economy Reporter Oh Ju-yeon] Kiwoom Securities stated on the 10th that although LG Electronics' price-to-book ratio (PBR) has fallen to a historically low level due to demand slowdown and performance deterioration concerns caused by the novel coronavirus disease (COVID-19), its first-quarter operating profit is expected to surpass market expectations and approach a historic high.

Accordingly, Kiwoom Securities raised LG Electronics' first-quarter operating profit estimate from 870.3 billion KRW to 945.5 billion KRW, analyzing that it will exceed the market consensus of 832.1 billion KRW.

Researcher Kim Ji-san of Kiwoom Securities explained, "In the case of TVs, production disruptions among Chinese companies have significantly increased, creating a more favorable competitive environment in overseas markets. In home appliances, demand for high-value-added health appliances such as air purifiers, dishwashers, dryers, clothing care devices, and cordless vacuum cleaners is increasing." He added, "Business solutions will continue to improve profitability trends supported by strong solar power demand in the U.S., and smartphones will reduce losses to the same level as the previous year through cost structure efficiencies such as ODM." He also evaluated, "Overall, the results of cost improvement and expense reduction efforts will be added, and exchange rate conditions are also favorable."

Researcher Kim expects the impact of production disruptions among Chinese TV companies to continue into the second quarter. He explained that the momentum of increasing market share in Europe is acting positively for home appliances, and domestic demand will be supported by the South Korean government's economic stimulus measures, which will help recover demand for high-efficiency home appliances and TVs.

Researcher Kim emphasized, "Although concerns about demand slowdown due to the global spread of COVID-19 will persist, cost burdens will be alleviated by the decline in raw material prices," adding, "Even after the 2009 financial crisis, rapid profit recovery was demonstrated based on exchange rates, raw material prices, and economic stimulus measures."

He continued, "There is a high possibility that this year's operating profit will challenge a historic maximum," and predicted, "On an annual basis, valuation discount factors will be alleviated through reduced losses in smartphones and automotive parts, and improved profitability in TVs."

This content was produced with the assistance of AI translation services.